What Retirement Crisis Are You Talking About?

The financial media operates 24 hours a day and despite the proliferation of company, market and economic news and endless commentary, financial journalists are avoiding any discussion about the biggest financial crisis facing every American: the retirement crisis.

Politicians don’t want us to talk about it since this is the ultimate form of bad news for working Americans. However, the reality is that many people will be working until their 70s and even then, if you are healthy enough, your quality of life will probably take a few steps down when you retire.

To put this into perspective, it means you will be working from your early-20’s until you reach the new proposed retirement age for Social Security at about age 70. This is over 50 years, minus time out for layoffs and finding new work. Plus, if Republicans privatize Social Security and make changes to Medicare, citizens will be paying more for those expensive services (financial planning and medical), so their disposable income will be reduced over their entire working lives.

The retirement crisis is about the future of the American way of life. This is why it is not publicly discussed in Washington and in the media

But that is only part of the bad news that contributes to the retirement crisis.

Most recently, the Republicans would roll back a Department of Labor bill that would effectively deny the ability of government workers to access any retirement plan. The roll-back would affect some 63 million Americans to access a retirement plan (aka Secure Choice Plans). This number would include 23 million people in seven states that have enacted retirement plans, including California, Connecticut, Illinois, Maryland, New Jersey, Oregon, and Washington. An additional 40 million people would lose coverage in the 28 states and two cities—New York and Philadelphia—that were considering similar universal retirement plans.

And what if these people cannot access a retirement plan? They would buy one from a private provider at a more expensive cost or they would do without.

The latest bad news from the U.S. Census Bureau shows that 66% of workers with access to 401(k)s and other defined-contribution retirement saving plans do not participate.

Plus, only 14% of companies even offer employees 401(k)s. What about the rest of American employers who don’t offer any retirement plans? Pensions have also been pushed into the museum, except for public employee plans and even these are being reduced to retirees without warning. They also face serious underfunding problems, so their future is not bright.

In terms of home ownership, people under 35 who own homes is at its lowest rate since 1994, according to the U.S. Census Bureau.

Income inequality is only going to make the retirement crisis worse. Wealth inequality is widely regarded as being the greatest today than at any other time since the Gilded Age, according to Paul Taylor of the Pew Research Center. Taylor said the current wage disparity among generations is being driven by the rise of technology and this gap “between young and old are at levels never before seen in modern times; so are the economic divides between whites, blacks, and Hispanics and so, of course, is the gap between rich and poor.”

Another report from a group called the Young Invincibles found that since the Great Recession began in 2007, the median wage for people between 25 and 34, adjusted for inflation, decreased in every major industry, except for health care.

In an article in the Atlantic, Edward Wolff, an economist at New York University, found that the median net worth of Americans has declined steeply in the past generation. It has decreased 85% from 1983 to 2013 for the bottom income quintile, down 63% for the second-lowest quintile, and down 26% percent for the third, or middle, quintile.

Research funded by the Russell Sage Foundation, found that the inflation-adjusted net worth of the typical household (one at the median point of wealth distribution) was $87,992 in 2003. By 2013, it had declined to $54,500, a decline of 38%.

Nor are these dismal number restricted to lower- and idle-income people. Another study cited in the same Atlantic article found that nearly one-quarter of households making $100,000 to $150,000 annually said they would not to be able to raise $2,000 in a month.

I could post a few more feet of bad news, but you get the point.

The reason why this is an undiscussed crisis is that it puts the new American Dream into perspective. Why work until you drop dead? Why work in a job where an employer considers you disposable , or does not value you enough to provide health and retirement benefits, so you can be valued and productive now and years into the future? The reason is that many employers think their workers are an expense. This makes them disposable.

From this perspective, the retirement crisis is as much about how employers consider their workers as it is about money. This is the new American workplace and people see if every day. No need for Republicans to cut benefits, privatize social programs and public land that all promote the social good, when employers are taking this same downward-spiral message to their own workers in cubicleland and company lunch rooms.

And the retirement planning industry is not much better. Save more, spend less, invest more in our recommended products (many of which are too expensive), is not financial education. It is also terrible public policy. This is why anyone who has been in the retirement or financial planning business for decades knows about this crisis, but they are either too afraid to say it exists or think it would be bad for business to tell their clients the truth about their future.

This is why Millennials don’t buy into the system. Many don’t want to be financially burdened by owning a house or even a car. Most value life experiences more than a job. Many don’t believe in the exalted virtues of capitalism and free markets.

So is there a retirement crisis? Yes, but it is much larger than retirement. It is about the future of the American way of life and the future of the American Dream. This is why it is not publicly discussed in Washington and in the media.

The alternative is to think about the future society in retirement that replaces the current one. At least the current one (Baby Boomers) has some who are getting significant pensions, but this will be the last. Most Millennials will see how their 401(k)s and diminished Social Security carry them for their 20-plus years after they retire. For Millennials, will the glass be half-full or half-empty? Or for many, will it be one-third full or one-third empty? This is possible because people don’t think there is a retirement crisis.

Chuck Epstein

Chuck Epstein has managed marketing communications and public relations departments for major global financial institutions and participated in the launch of industry-changing financial products. He also has written by-lined articles for over 50 publications, five books and served as editor and publisher of nation’s first newsletter on the topic of using the PC for personal investing and trading. (“Investing Online, 1994-1999). He also is a marketing consultant, writer and speaker on topics related to investor protection and opportunities in the very dynamic cannabis industry.

He has held senior-level marketing, PR and communications positions at the New York Futures Exchange, Chicago Mercantile Exchange, Lind-Waldock, Zacks Investment Research, Russell Investments and Principal Financial.

He has won national awards from the Mutual Fund Education Alliance (MFEA) and his web site, www.mutualfundreform.com, was named best small blog in 2009 by the Society of American Business Editors and Writers (SABEW).

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